The GE Marketing Position Strategy

General Electric is rather unique in the world of business these days: they operate as a conglomerate. A popular business format in the 70's, the conglomerate lost its luster in later decades as some of the largest ones imploded. But GE seems to be able to pull it off. And a key reason is their Market Position Analysis.

General Electric has numerous divisions and makes a wide variety of products, including:

• Wind Turbines
• Power Plant Generators
• Airplane Engines
• Advanced Healthcare Screening Devises
• Locomotive Engines
• They own ½ of NBC Universal
• and they do a dozen other things

I was intrigued with a key financial tool they used for managing investment across their various product lines. The process starts with an honest assessment of where each product ranked in its own marketplace. Each product was evaluated, and put into one of three categories:

1.) If the product was ranked among the top three in its industry / market segment, it was provided the investment necessary to keep it there.

2.) If the product was not in the top three but had strong growth potential in the near term, it was given the investment necessary to get it into the top three.

3.) If the product wasn't in the top three, and wasn't likely to get there, the investment of new funds was stopped, the division was milked for cash or, often, sold.

Here's the reason:

The top three companies in any market generally offer strong value, and have the pricing power to earn reasonable profits.

All of the other companies in the market end up competing on price, and earn little or no profits.

So GE invested its capital in products that were proven winners, and products that had strong potential growth. It cut its losses on those that never really made it, or had run their course.

Applying the lesson to small business

Contrary to the logic used by many entrepreneurs, a small business needs to be even more focused than its larger competitors. Here's why:

• The small operation has even less cash available to invest in non-winners.
• The small operation has even less management capacity to invest in low-profit lines of business.

We strongly recommend that each business periodically undertake a Line Of Business Review. This LOB analysis should be run for each segment of your operations (either product or services). It should detail not only your sales per each LOB, but also look at customer groupings and net profits for each segment.

It can be a lengthy process to do all of this analysis, but the results will help you do a better job of tailoring your business for the future.

Practical Tip of the Day:

Once you have completed your LOB analysis, ask yourself three questions:

1.  Which products are at the top of their field, and could justify a margin increase?
2.  Which products could be enhanced to get them to the top of their field?
3.  Which products could be dropped without having a negative impact on your bottom line?